Premium bonds

Premium bonds

  • Premium bonds have been a national institution since 1956
  • Find out how premium bonds compare with savings accounts
  • Check the odds for winning a prize
  • Discover what happens when you've won a prize

Premium bonds are the nation's favourite savings product. Instead of paying interest, every bond is entered into a monthly prize draw, with winners being selected at random by National Savings & Investments (NS&I). 

You can invest from £100 up to £50,000 in total. Monthly prizes start at £25 and there are two £1m monthly jackpots, although NS&I reduced the number of other big prizes in June 2016.   

How likely am I to win a prize?

NS&I computer ERNIE (Electronic Random Number Indicator Equipment) generates random numbers which are then matched against eligible bond numbers to determine the winners. 

Landing a prize is essentially a lottery, so you could hit the jackpot, or never win a single prize, but the odds of each £1 bond number winning a prize have been estimated as 30,000 to one. 

Do I have to declare premium bond prizes on a tax return?

No. Any winnings are tax-free and are not counted as part of your taxable income, so you don't have to declare them.

How much interest do premium bonds pay?

Premium bonds don't pay any interest in the normal sense. However, the annual prize fund interest rate, which dropped from 1.35% to 1.25% in June 2016, determines how much money is issued as prizes every month. 

Essentially, it means someone with average luck may get an annual return of around 1.25%. Individual bond holders may get more or less than this, depending on how frequently they win. 

How can I find out if I've won a prize each month?

Prize winners are normally notified in writing (or in person if they have won the £1m jackpot). You can check for recent and 'missed' prizes on the NS&I website by entering your bond holder’s number. If you have lost track of old bonds there is a free tracing service here, too.

Are old premium bonds ignored in the prize draw?

No. All bonds are eligible for each month's draw, regardless of their date of issue (provided you have held them for a full calendar month following the month you bought them). A bond purchased in 1959 won the jackpot in July 2004.

It's true that more recent bonds win more often, but that is because there are more of these in circulation. Premium bond sales soared after the top prize was increased to £1m in 1994.

Find out more: How to claim lost premium bonds - could you be sitting on a fortune?  

Can I inherit premium bonds from my parents?

Premium bonds can't be transferred, but their value does form part of the estate of the deceased. Executors can claim this from NS&I by completing a special claim form which can be found on the NS&I website or obtained by post from National Savings and Investments, Blackpool FY3 9YP.

How safe are premium bonds?

NS&I is backed by the Treasury so 100% of your original investment is safe and you can get it back at any time. However, you may not win enough in prize money to protect your savings from inflation. Other investments, such as NS&I index-linked savings certificates, offer a more certain, if fairly low return – and they're unlikely to make you a millionaire, of course.

So should I put my savings into premium bonds?

Premium bonds offer the thrill of a flutter without the risk of losing your original stake, but they do not offer a guaranteed return. Over the years your money could be eroded by inflation if you don't win regularly, so it makes sense not to put all your money into them.

Prizes are tax free but so is interest earned from other savings thanks to the personal savings allowance – this allows basic-rate taxpayers to earn £1,000 of interest a year tax-free, while higher-rate taxpayers can earn £500. 

For anyone relying on interest to contribute to their income, the Which? Money Compare tables let you search hundreds of savings accounts and cash Isa deals from providers large and small so that you can find a good home for your nest egg. We also combine this with our unique customer scores that show you how well the providers featured are likely to treat you in the long run.

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Last updated:

June 2016

Updated by:

Chiara Cavaglieri

Which? Limited (registered in England and Wales number 00677665) is an Introducer Appointed Representative of Which? Financial Services Limited (registered in England and Wales number 07239342). Which? Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Registered office: 2 Marylebone Road, London NW1 4DF.